Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

616 Groups of companies: interpretation

Summary

This section sets out the various interpretational provisions for the remaining sections of this Chapter.

Details

Definitions

(1) “company”, “principal company”, “subsidiary”, “group” and “chargeable asset” are defined for the purposes of this section and succeeding sections in this Chapter. Any reference to a company in this section (which defines a group of companies) is a reference to a company which is resident in a relevant Member State (as defined in subsection (7) below) for the purposes of a tax which corresponds to Irish corporation tax. However, any reference to a company in sections 617 to 626 (which generally provide reliefs) only applies to a company which is resident in the State. This means that a transfer of assets from one company to another will trigger a capital gains tax charge unless both of the companies are resident in the State.

For the purposes of this Chapter, an “effective 75 per cent subsidiary” means that —

  • the company is a 75 per cent subsidiary of the parent within the meaning of section 9 i.e. the parent owns directly or indirectly not less than 75 per cent of the ordinary share capital of the company,
  • the parent is beneficially entitled to not less than 75 per cent of the profits of the company available for distribution, and
  • the parent would be entitled to not less than 75 per cent of the assets of the company available for distribution on a winding up.

The provisions of sections 413 to 419 are imported into the section for the purposes of the definition of “an effective 75 per cent subsidiary”. Those sections underpin the terms used in the definition and identify the real and ultimate equity interest in a company for the purposes of establishing whether it is a member of a group of companies.

Notwithstanding the definition of “effective 75 per cent subsidiary” as set out above, a company will be an “effective 75 per cent subsidiary” of the National Asset Management Agency (NAMA) where shares in that company are held directly by the Agency. In addition, a company which is an “effective 75 per cent subsidiary” of a company which is itself an “effective 75 per cent subsidiary” of the National Asset Management Agency will also be an “effective 75 per cent subsidiary” of NAMA.

Limitation on meaning of “company”

(2) The meaning of company is limited to certain specified companies, building societies and industrial and provident societies.

Change in “principal company” – effect on group

(3) A group remains the same so long as the same company remains the principal company, even if the principal company becomes an effective 75 per cent subsidiary of another company. The main effect of this provision is to prevent a company “ceasing to be a member of the group” just because the group is taken over by another company and thereby becomes a part of a larger group.

Principal company becoming an SE/SCE – effect on group

(3A) Where a company that is the principal company of a group of companies —

  • becomes an SE by reason of being the acquiring company in the formation of an SE,
  • becomes a subsidiary of a holding SE,
  • is transformed into an SE, or
  • becomes an SCE in the course of a merger to form an SCE,

then the group of which the company was the principal company up to the time the SE/SCE was formed and any group of which the SE/SCE is a member on its formation will be regarded as the same group.

Winding-up of a member company – effect on group

(4) Where a company goes into liquidation this is not taken to be an occasion of either it or its subsidiaries “ceasing to be a member of a group”.

Nationalised bodies

(5) The provisions of this Part regarding members of a group of companies extend to the various industrial bodies with related functions under national ownership or control.

Application of Capital Gains Tax Acts

For the purposes of this Part the rules in the Capital Gains Tax Acts —

  • (6)(a) for the apportionment of cost on a part disposal, (section 557) are to be operated before regard is had to the various provisions which secure that in certain circumstances no gain or loss is deemed to have arisen on the disposal, and
  • (6)(b) for the adjustment of the cost of shares in close companies transferring assets at an undervalue, are not to apply to transfers within a group of companies which are deemed to produce “no gain/no loss”.

(7) For the purposes of this Part the following definitions will apply:

“EEA Agreement” means the Agreement on the European Economic Area signed on 2 May 1992, as adjusted by the Protocol signed on 17 March 1993;

“EEA State” means a state which is a contracting party to the EEA Agreement;

“relevant Member State” means —

  • a Member State of the European Communities, or
  • if not a Member State, an EEA State whose government has made arrangements which have the force of law by virtue of section 826(1).

Relevant Date: Finance Act 2019